Category Archives: Credit markets

Is Securitization Coming Back?

In a nutshell, yes, but not in the way the industry hopes. In a Financial Times article. Gillian Tett files a somewhat dumbfounded report from the European Securitization Forum in Cannes. While the event has gone wildly downscale from last year’s bash, the participants were hopeful that the return of good times was just around […]

Early Estimates of Losses From MBIA, Ambac Downgrade

An institutional investor passed along these initial estimates of the damage that the Street will take from the downgrade of MBIA and Ambac, Bear in mind that these presumably do not become operative until Moody’s joins S&P in deeming both concerns’ insurance subs to be AA. These loss forecasts are only those to banks and […]

MBIA, Ambac Lose AAA from S&P

So at least one big rating agency, Standard & Poor’s, finally got some nerve and downgraded the two big monolines, MBIA and Ambac . Note that this downgrade applies only to the insurance subsidiary, but that is the critical entity, the one that provides debt guarantees. From Bloomberg: MBIA Inc. and Ambac Financial Group Inc., […]

Monoline Death Watch: Moody’s Puts MBIA, Ambac on Review for Downgrade

We had said that the melodrama with the big bond insurers MBIA and Ambac early this year had failed to solve their underlying problems and was merely postponing the inevitable by a few months. Readers may recall that an effort by New York insurance superintendent Eric Dinallo to get the monolines to raise substantial amounts […]

Rising Three-Month Spreads Suggest Worries About Banks Increasing

Just when the Fed thought it had gotten financial markets turbulence under control, conditions start to worsen. Lehman is looking wobbly and markers are signaling increased worries about interbank funding. Bloomberg tells us that a key indicator of bank willingness to lend, the spread between three month Libor and the forward overnight index swap, is […]

Lehman on the Ropes Again, Looking to Raise Equity

Lehman managed to escape the same fate as Bear Stearns around the Ides of March partly due to the heroic intervention of the Fed, in part to reporting first quarter profits. A member of the skeptically-minded short cohort described the earnings as a sham, and noted that they depended entirely on counting the increase of […]

Fed On Hold Till the Fall (Despite Calls to Raise Rates)?

It appears the US central bank got taken to the woodshed at a conference hosted by the New York Fed for overly aggressive rate cuts, but despite jeering from the peanut gallery, it looks likely that the Fed will hold pat until at least the fall. While I have no idea of how representative his […]

No Free Lunch: Fed Buying Less at Treasury Auctions Thanks to New Facilities

There’s been a lot of hand-wringing about the alphabet soup of new Federal Reserve facilities having hidden costs and generating unintended consequences. The biggest focus of concern is that the assets that the central bank has taken on may come a cropper, leaving the taxpayer holding the bag. Reader Lune has pointed out some examples […]

UBS CDS Lawsuit: Harbinger of Things to Come?

Gretchen Morgenson of the New York Times in “First Comes the Swap. Then It’s the Knives.” delves into a dispute between UBS an Paramax, a Connecticut-based hedge fund group over a credit default swap written by Paramax in 2007 on a subprime CDO (you can already guess how this movie ends). Morgenson-bashing is a popular […]

Warning: Credit Default Swaps May Not Work As Advertised (And That’s Even When They Do Work)

Satyajit Das has a very useful post, “The Credit Default Swap (“CDS”) Market – Will It Unravel?,” in which he describes some of the ways that CDS may fail to perform as expected in real world situations, ie, when companies start getting in trouble. While this work isn’t quite at the Tanta Uber-Nerd level of […]

Signs of Worsening Credit Conditions

Two UK columnists looked at the credit markets, and neither liked what he saw. And they wrote it up more colorfully than most of their American counterparts would have. The first, Nils Pratley of the Guardian, tells us that that the idea that the credit crisis is on the wane is more than a tad […]

Credit Derivatives Clearing House Planned For September

There’s an odd little story on the home page of the Financial Times website, odd in three respects. First, it discusses a development, namely, the launch of a credit derivatives clearinghouse that is important enough that it ought to be reported more broadly, yet several searches on Google News came up empty-handed. Readers no doubt […]

Monoline Death Watch: CDO Unwind Disputes

Reader Abdul sent me a piece that ran in the New York Post on simmering disputes between investment banks trying to unwind CDOs and monolines that provided credit enhancement. Yes, I know the Post isn’t the usual place to see what amounts to breaking financial news, but it was the first out with some stories […]

"Restraining asset and credit booms"

Willem Buiter decided to provide some further thoughts on regulatory reform over the holiday weekend. Given the nature of posting, and the difficulty of devising banking reforms, most proposals are going to fall short on detail. But this one falls a bit shorter than I’d like. For instance, Buiter clearly assumes international cooperation; these ideas […]

Monoline Death Watch: FASB Imposes Strict Rules On Loss Reserves

For those who remember the “monolines on the ropes” days, one of the big bones of contention between critics like Bill Ackman of Pershing Square and industry executives was how to account for the fact that the risks of default on the guarantees the companies had made had increased. Ackman used a conservative mark to […]